PM Modi states 5 reasons for GST’s “success”

1^st of July 2018 will mark the one-year of GST’s existence. It will be the one-year anniversary of one of Modi’s most controversial steps after demonetization and also one of the biggest tax reforms over the globe. In our PM’s monthly radio “Mann ki baat” this Sunday, he addressed the nation and stated 5 reasons why he thinks the Goods and Services Tax rollout was successful.

1)     Cooperation from the states
Mr. Narendra Modi believes that the successful implementation of GST exemplifies cooperative federalism. True to his views, it isn’t possible to include people from different political ideologies and instrument an altogether new system without the unanimity of the states in a decentralized system. A consensus of opinions from individual state governments to serve the interest of the public is a major reason why the GST structure could function without hassles.

2)     Honesty as a valued moral
Prior to the existence of GST, there were 17 forms of taxes that an individual had to pay. Not only is it now convenient because there is a single applicable tax but is also uproots the domination of tax inspectors. The high number of complaints filed by the public in the past, that has been looked at as evidence for the prevalence of corruption, has now decreased. GST thus marks the celebration of honesty.

3)     The integration of IT into the field
It has been introduced as an integral part of the Finance and Banking sector in India. Computers have replaced the human police in the field of taxes. Income tax returns, refunds, etc. are all filed online now, so the chances of human error in evaluation or illegal maneuvers is lowered. 

4)     Decreased checkpoints, faster movement of goods
Commercial tax check posts in a large number of states were abolished after the introduction of GST. Vigilance has become easier. Not only does this benefit the government but it also facilitates the quick movement of goods. The area of logistics is reaping great benefits from this.

5)     The power of the masses
If the GST system received a revolt from the public, it wouldn’t have been possible for the nation, as a whole, to reap any of the aforementioned benefits. PM Modi thanked the citizens of the country for willingly adopting the system and making it a success. In such a vast country, with a great diversity in population, market research claims that it might take 5-7 years for proper implementations of tax reforms.

The common man’s take on the success of GST

The party is over for those who don’t pay taxes. And the citizens of India are definitely happy paying just one kind of tax for everything from shopping bills to their household items. But if there is one thing that the country still lacks, it is a robust development in the IT sector to support this drastic reform. Mapping dealer’s data with PAN and integrating banks in this process continues to be a challenge. The economic scenario of the country amidst all these developments remains hard to judge. There is no harmony in public opinion and the success of GST among them remains subjective. 

Why Indian startups are welcoming GST

The present news is making the buzz in the country, GST goods and services tax is surely a relief for the tax payers, as they are now estimated to pay a single combined tax in its place of the superfluity of taxes like Central Excise, Octroi, State Value- Added Tax, Service Tax, and many other subsidiary taxes. Combination and transformation of procedure of indirect taxation will now be made with ease and more efficient. The GST bill is supposed to fuel the economic integration of the Indian economy. 

Considering this tax will be charged on sales, production, and consumption of goods apart from services at the State government and Central government levels, it is rest certain that the difference between Goods and Services will be diminish progressively, making sure tax compliances become easier. It as well, is appealing to know that the country is taking one more step towards development with GST as most of the countries that are developed use this form of taxation, not only for ease and convenience but to avoid double taxation too.

Goods and Services tax will be allocated on transaction value that includes contract, packing cost, and all other expenses acquired for sales. Whereas, every other state is in support of the bill, the government of Tamil Nadu feels that this bill may take away the independence of the State government.

Some of the main influences of GST on startups in India are as follows:

1)      Immunity for new businesses:

Currently, businesses with gross revenue of more than INR 5 lakhs should get VAT registrations and pay VAT. But, GST will rise this limit upto R 10 lakhs and above. The industries with earnings between Rs. 10L and 50L will be taxed at lesser rates. This will definitely help to reduce tax burdens on freshly established businesses.  In addition, GST will bring about an ease in launching new businesses. For instances, new businesses require a VAT registration from sales tax department, other than undergoing many processes and fee payments in every state. Here, GST comes in a welcome change, carrying out uniformity in the process. Goods and Services Tax will allow centralized registration, thereby encouraging business startups, and developments.    

2)      Relief for sales and services sectors:

One of the most complex businesses is restaurants that are both into services and sales, go down under two taxations, i.e. food and service. Therefore, they calculate both VAT and service tax separately, creating the whole calculation process very complicated. GST comes as a relief to this sector in which the taxation will not distinguish between sales and business services, making sure tax calculations are done on the total amount.

3)      Cost Reduction- transportation & logistics:

GST will make sure that the interstate movement becomes inexpensive and is less time consuming, by eradicating small border taxes and resolving check post issues. This will unavoidably decrease the number of costs connected with upholding greater stocks, as there will be a smooth movement of goods.

4)      Simple revenue system:

At the moment, startups expend a lot of energy, time, and hard work in organizing innumerable taxes at innumerable points. Considering and then following unlimited rules and regulations at different States makes the procedure of setting up a new business a very complex affair. Goods and services tax not only simplifies the process by incorporating all the taxes to be charged but as well makes the whole process of tax paying an entire lot simpler.

5)      Benefit for online startups:

With no doubt, goods and services tax has demonstrated a blessing for all the business startups operating through e-commerce platform. There are various startups that are operating in the cyberspace and are offering products by means of the internet. The earlier taxation regime had been making hurdles for them as they had to pay various taxes in each state. But, GST execution will set them free from these hurdles.

In general, GST will be a blessing for business startups and various other sectors. It is estimated to be a large savings for logistic, manufacturing and retail companies. But, decision other sectors dealing with luxury products such as tobacco products, cars, etc. will face higher tax rates between 27%-40%, as per market research.  

There are numerous arguments that are clouding the sky of GST. Above mentioned advantages, with others are being spotlighted by those who concur with the pathbreaking tax reform. The critics of goods and services tax hold different views and are raising arguments in the direction of revenue losses which the state might incur. But, the Centre has taken this into factor and has made a provision to redress state for any losses created by them as a consequence of. Therefore, it won’t be wrong to plan that GST’s positives be more important than its negatives and it is certainly going to reform that way startups were operating.